Stirrings at the IRS

March 25, 1997

The Internal Revenue Service has been doing some unprecedented things of late. No, not instant refunds or rapid service on its taxpayer hot lines. But some steps nearly as remarkable.

The country's least-loved bureaucracy has actually been offering up ideas for reforming itself. Outgoing IRS Commissioner Margaret Milner Richardson last week endorsed five such changes, including stricter oversight of the tax collecting agency by the US Treasury, an emphasis on management rather than tax-law expertise at the top of the IRS, and, for good measure, a simplified tax code.

A few days earlier, Mrs. Richardson did something equally unusual for an IRS chief. She asked Congress's permission to release some taxpayer information she said would show that the agency is not on a vendetta against conservative nonprofit organizations - as charged by the editorial page of the Wall Street Journal, among others. The release of such information is blocked by a post-Watergate law designed to protect individuals against politically motivated misuse of tax records.

Critics and one knowledgeable whistle-blower have noted that the IRS tends to hide behind this law meant to protect taxpayers to avoid releasing information about anything it does - thus stifling criticism and helping solidify its reputation as an insular, self-preserving bureaucracy.

But criticism of the nation's tax collector has, if anything, stacked up like tardy 1040s in recent years. The standard complaints are lack of responsiveness, and arbitrariness, in dealing with filers. Also voluminous are charges of mismanagement and inefficiency in the drawn-out effort to computerize IRS operations. Then there are stories of lax management ethics, capped by bureaucratic scurrying to gloss over wrongdoing.

The National Commission on Restructuring the Internal Revenue Service was formed last year to burrow into these complaints. Some of its ideas will probably coincide with those backed by Mrs. Richardson. The panel's findings and recommendations are due sometime this summer.

They are not likely to satisfy the IRS's harshest critics, of whom more than a few sit in Congress. Rep. Bill Archer (R) of Texas, Ways and Means Committee chair, wants nothing less than the abolishment of the income tax and its replacement with a national tax on consumption. The flat tax, too, remains a radical idea with strong champions in Congress, despite its short life on the campaign trail last year.

That kind of restructuring would eliminate the need for most of today's 100,000-plus IRS employees, and much of the agency's $7 billion budget. More to the point, it would endanger a multibillion-dollar tax preparation and consulting industry that thrives on the current tax complexity. And, of course, it would at the same time dismantle the often positive social-engineering mechanisms built into the current system.

Despite the criticism by Mr. Archer and others, the IRS will be with us for many tax seasons to come. To its credit, it gets the job done, even if in a sometimes clunky and unfriendly manner. We do hope to see a significant remodeling, however. Tax simplification, greater openness, and better management are all part of what the IRS and its overseers in Congress owe the country.